Online car retailer Cazoo has announced it will abandon its European operations and cut 750 jobs in the latest sign of setback for a company that hoped to transform its industry.
The company will lay off all of its employees in France, Germany, Italy and Spain as it closes operations, leaving it to operate only in the UK as it tries to preserve cash.
It is the second time in 2022 that Cazoo has cut 750 jobs, after announcing layoffs in the UK in June. It comes amid intense pressure on consumer spending as inflation surges across the globe.
Cazoo, founded by internet entrepreneur Alex Chesterman and launched in 2018, is part of a group of online startups that aimed to disrupt the used car industry by selling directly to consumers.
It is UK-based but listed on the New York Stock Exchange through a merger with a special purpose acquisition company (Spac), run by billionaire hedge fund manager Dan Och. Announcing the combination, Chesterman said he wanted to “transform the way people buy cars across Europe”, and investors seemed to buy into that vision, with the company’s market value peaking at almost £11 billion. (£9.6 billion) in February 2021.
The company has grown rapidly, with revenue more than doubling year-on-year to £333m in the second quarter of 2022. However, losses for the same period amounted to £243m. million pounds – a cash burn that many analysts and rivals have long had. considered unsustainable.
The company’s market value has fallen in recent months to less than £1bn, but its share price jumped more than 16% on Thursday as investors appeared to welcome the prospect of slower spending.
The decision to ditch Europe comes just months after Cazoo agreed to sponsor Olympique de Marseille in the latest in a series of sports sponsorships as part of its aggressive growth strategy.
In the top European football leagues, Cazoo also has Real Sociedad and Valencia in Spain, Lille Olympique in France, Bologna FC in Italy and SC Freiburg in Germany. Cazoo contacted teams across Europe to negotiate an “orderly reduction” in sponsorships.
In the UK, Cazoo retains sponsorship of Aston Villa, the Hundred cricket competition, the horse racing Derby and even FishOMania, a sport fishing event.
Chesterman, chief executive of Cazoo, said dropping out of Europe would protect the company’s balance sheet and ensure it doesn’t need to tap investors for more funding.
He said the company faced a “challenging macro backdrop” but said there was “continued strong customer demand” in the UK.
“Given our aim to reach profitability by the end of next year, we have made the difficult decision to focus solely on the huge UK used car market, worth over £100 billion a year,” Chesterman said.
“I would like to thank all of our EU colleagues who are affected by this decision, and we will of course seek to support them in any way we can.”